UPDATE 2-Russia tightens squeeze on Ukraine with gas price rise

* Price discount was agreed before political crisis

* Gazprom says Ukraine's gas debt is $1.7 billion

* Naftogaz chief to visit Moscow this week
(Adds detail, background)

By Vladimir Soldatkin

MOSCOW, April 1 Russian natural gas producer
Gazprom announced a more than 40 percent increase in
the price of gas for Ukraine on Tuesday, stepping up economic
pressure on Kiev in its crisis in relations with Moscow.

Price rows have in the past led to cuts in Russian gas
supplies to Ukraine and decreases in onward deliveries to
Europe, but this time the financial blow to Kiev is set to be
cushioned by a new International Monetary Fund loan package.

Ukraine will now have to pay $385.5 per 1,000 cubic metres
of gas in the second quarter, an increase from the $268.5 agreed
in December and higher than the average price for clients in the
European Union but around the level Kiev had expected.

The decision, which had been clearly flagged by President
Vladimir Putin, ended a discount that had been agreed in
December, before the crisis over the ouster of Ukraine's
Moscow-backed president and Russia's annexation of Crimea.

Gazprom's Chief Executive Officer, Alexei Miller, said an
increase was justified because Ukraine's debt for unpaid gas
bills now stood at $1.7 billion.

"The December discount for gas cannot be applied any more,"
Miller said, adding that the transportation tariff for Gazprom's
gas to Europe via Ukraine was increasing by 10 percent, in line
with earlier agreements.

The new head of Ukraine's state energy company Naftogaz,
Andrei Kobolev, is expected to visit Moscow this week for talks
on Russian gas supplies. Ukraine has been working on reducing
its dependence on gas from Russia, which meets a half of its gas
consumption.

Before the December discount, Ukraine paid a price of around
$400, which Kiev said was unaffordable for its fragile economy
.

"The $385.5 price is absolutely expected and clearly in
accordance with the contract. The (December) discount is not
continued," Kobolev told a news conference in Kiev.

UKRAINE MAY LOOK TO EU FOR ENERGY

Gazprom has suggested a new conflict over gas payments and
supplies - like disputes in 2006 and 2009 that halted supplies
to Ukraine and onward to Europe - could break out, though it has
said it has no interest in a resumption of such disputes.

But the IMF has agreed a $14-18 billion standby credit for
Ukraine, in exchange for painful economic reforms, as part of a
$27 billion international package aimed at getting the country's
economy on its feet.

The IMF should be ready to hand over the first $3 billion of
the new aid package this month, its top European official has
said.

Even so, Prime Minister Arseny Yatseniuk has said Ukraine
will need energy from the EU to protect it from the
repercussions of its standoff with Moscow, on which it depends
for over half its oil and gas.

Tension between Moscow and Kiev rose when Russian forces
took control of Crimea last month and the Black Sea peninsula
voted on union with Russia in a referendum which the United
Nations General Assembly declared invalid. Russia formally
annexed Crimea on March 21.

Gazprom has already approached local authorities with a
proposal to over Crimea's oil and gas sector, including energy
company Chernomorneftegaz, which hopes to double its gas output
next year to 3 billion cubic metres.

Putin agreed in December on the gas price discount for
Ukraine and offered a financial bailout to Kiev after it decided
not to sign a trade agreement with the EU and opted to rebuild
economic ties with Moscow instead.

The discount was subject to a quarterly review.

After Ukrainian President Viktor Yanukovich was deposed in
February following months of anti-government protests, Gazprom
and Putin said the gas price discount would be scrapped because
of the debt.
(Reporting by Vladimir Soldatkin, additional reporting by Katya
Golubkovaand Pavel Polityuk in Kiev, Editing by Timothy Heritage
and Angus MacSwan)

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